Correlation Between Zhongtong Guomai and Anhui Huaheng

Can any of the company-specific risk be diversified away by investing in both Zhongtong Guomai and Anhui Huaheng at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Zhongtong Guomai and Anhui Huaheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongtong Guomai Communication and Anhui Huaheng Biotechnology, you can compare the effects of market volatilities on Zhongtong Guomai and Anhui Huaheng and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Zhongtong Guomai with a short position of Anhui Huaheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongtong Guomai and Anhui Huaheng.

Diversification Opportunities for Zhongtong Guomai and Anhui Huaheng

0.72

Correlation Coefficient

Zhongtong Guomai  Anhui Huaheng

Poor diversification

The 3 months correlation between Zhongtong and Anhui is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Zhongtong Guomai Communication and Anhui Huaheng Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huaheng Biotec and Zhongtong Guomai is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Zhongtong Guomai Communication are associated (or correlated) with Anhui Huaheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huaheng Biotec has no effect on the direction of Zhongtong Guomai i.e., Zhongtong Guomai and Anhui Huaheng go up and down completely randomly.

Pair Corralation between Zhongtong Guomai and Anhui Huaheng

Assuming the 90 days trading horizon Zhongtong Guomai Communication is expected to generate 1.17 times more return on investment than Anhui Huaheng. However, Zhongtong Guomai is 1.17 times more volatile than Anhui Huaheng Biotechnology. It trades about 0.02 of its potential returns per unit of risk. Anhui Huaheng Biotechnology is currently generating about -0.05 per unit of risk. If you would invest  785.00  in Zhongtong Guomai Communication on December 26, 2024 and sell it today you would earn a total of  11.00  from holding Zhongtong Guomai Communication or generate 1.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Zhongtong Guomai Communication  vs.  Anhui Huaheng Biotechnology

Zhongtong Guomai Com

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongtong Guomai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Huaheng Biotec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anhui Huaheng Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zhongtong Guomai and Anhui Huaheng

The main advantage of trading using opposite Zhongtong Guomai and Anhui Huaheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongtong Guomai position performs unexpectedly, Anhui Huaheng can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Anhui Huaheng will offset losses from the drop in Anhui Huaheng's long position.

The idea behind Zhongtong Guomai Communication and Anhui Huaheng Biotechnology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.